MP Resignations do not bode well for the Pound

The resignations of both David Davis and Boris Johnson puts the UK in a very difficult position. The Sterling report below looks into the way political uncertainty such as this can impact a currency during an already volatile period with the Brexit deal not yet confirmed. The table below shows the range of exchange rates during trading on Wednesday showing the difference in return you could have received when selling £200,000.00.

Currency Pair

% Change

Difference on £200,000

GBP

EUR

0.36%

€820

GBP

USD

0.42%

$1120

GBP

CAD

0.67%

CAD $2340

Political uncertainty historically weakens the currency in question. To resign at such a crucial stage of Brexit talks could have been timed to cause maximum damage to negotiations. It could be a ploy to oust Theresa May from her position.

We have also seen two Conservative vice chairs resign since Boris Johnson’s departure.

If there is a leadership challenge we could see Sterling suffer significantly.

The one positive to the situation, positive for the economy that is. Is that we could be moving toward a softer Brexit. Davis and Johnson felt May was giving too much away with her Brexit proposal and that was the reason behind their resignations.

If you have a requirement selling Sterling it may be wise to take advantage of current levels. If you are looking at risk vs reward. The risk of a substantial fall in Sterling value definitely outweighs the potential for gains at present.

White Paper Release

Today we will see the release of the white paper documents detailing Theresa Mays’s proposal for Brexit. The point of contention for Davis and Boris was the plan for a common rulebook for industrial goods and agricultural products. The paper has been approved for release however.

Mairead McGuinness, vice president of the European Parliament, said the fact the white paper will still be published on Thursday "bodes well" for ploughing ahead with presenting the plan to the EU.

She stated "I'm happy to hear it will be published on Thursday." The release does have the potential to cause volatility as there may well be nuances to the proposal. It is by no means a deal done.

N. Haywood

Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.